Consumer prices in the U.S. were up 0.4% MoM in September 2022, and twice the market expectation of 0.2%. The annual inflation rate slowed for a third consecutive month, running to 8.2%, which is the lowest reading in seven months. The annual CPI declined fractionally from 8.3% in August but turned out stronger than expected again topping market forecasts of 8.1% and is well above the Fed’s target rate of 2%.
The monthly core CPI which strips out the volatile food and energy components, rose by 0.6% for a second straight month, indicating that the broad and sustained inflationary pressures in the economy persist. The annual core CPI reached a new 40-year high, rising to 6.6%, from 6.3% in August, coming above market expectations of 6.5%. Given the volatility of food and energy prices the Federal Reserve views the core inflation as a better indicator of future price trends. A rapidly rising core rate is a sign of persistent price pressures that can only be stamped out by higher interest rates. The hotter-than-expected U.S. inflation readings for September, reinforced the likelihood the Fed would extend its aggressive tightening. After the CPI data release the market is now pricing in a 98% chance that the Fed would hike rates by another 75 basis points in November, which would be the fourth such a hike in a row.
The cost of living climbed relatively mildly in September, partly because of cheaper gasoline prices, which kept the overall price increase down and depressed the CPI print. Still, the rise in the CPI over the past year is the highest annual inflation rate since 1982 and more than four times the annual increase in inflation in the decade before the pandemic. The fight against inflation is likely to be far from over given the recent oil output cut by OPEC+ and the rising price of crude over the past week.
After the release of the keenly awaited inflation data, all U.S. stock indices experienced a wild roller-coaster ride, reversing the initial sharp declines and finishing the session up more than 2%, despite the hot inflation readings. The rally in the stock markets suggests that investors feared inflation data could have been worse. The rally came from oversold stochastic levels and proximity to previous resistance, which often acts as a support. Nonetheless, equity markets are well and truly in bear market territory, and we favour further weakness over the medium-term. The first potential technical downside target is 3,400 followed by 3,200 in the coming months.
For magnified exposure to U.S. equity indices check out our 3x Long or Short US 500 ETPs or our 3x Long or Short Tech100 ETSs.
Sandeep joined Leverage Shares in September 2020. He leads research on existing and new product lines, asset classes, and strategies, with special emphasis on analysis of recent events and developments.
Sandeep has longstanding experience with financial markets. Starting with a Chicago-based hedge fund as a financial engineer, his career has spanned a variety of domains and organizations over a course of 8 years – from Barclays Capital’s Prime Services Division to (most recently) Nasdaq’s Index Research Team.
Sandeep holds an M.S. in Finance as well as an MBA from Illinois Institute of Technology Chicago.
Julian joined Leverage Shares in 2018 as part of the company’s primary expansion in Eastern Europe. He is responsible for web content and raising brand awareness.
Julian has been academically involved with economics, psychology, sociology, European politics & linguistics. He has experience in business development and marketing through business ventures of his own.
For Julian, Leverage Shares is an innovator in the field of finance & fintech, and he always looks forward with excitement to share the next big news with investors in the UK & Europe.
Violeta joined Leverage Shares in September 2022. She is responsible for conducting technical analysis, macro and equity research, providing valuable insights to help shape investment strategies for clients.
Prior to joining LS, Violeta worked at several high-profile investment firms in Australia, such as Tollhurst and Morgans Financial where she spent the past 12 years of her career.
Violeta is a certified market technician from the Australian Technical Analysts Association and holds a Post Graduate Diploma of Applied Finance and Investment from Kaplan Professional (FINSIA), Australia, where she was a lecturer for a number of years.
Oktay joined Leverage Shares in late 2019. He is responsible for driving business growth by maintaining key relationships and developing sales activity across English-speaking markets.
He joined Leverage Shares from UniCredit, where he was a corporate relationship manager for multinationals. His previous experience is in corporate finance and fund administration at firms like IBM Bulgaria and DeGiro / FundShare.
Oktay holds a BA in Finance & Accounting and a post-graduate certificate in Entrepreneurship from Babson College. He is also a CFA charterholder.
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